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UCLA experts discuss potential impact of CA’s budget deficit on UC funding

The California State Capitol is pictured. (Wikimedia Commons photo by Thomas W. Toolanvia via Upload Wizard)

By Gabriella Sonnhalter

April 11, 2024 7:55 p.m.

This post was updated April 16 at 9:53 p.m. 

As Gov. Gavin Newsom and the California legislature tackle the state’s nearly $60 billion estimated budget deficit, some UCLA experts said the UC’s funding might be at risk – which could lead to tuition hikes or altered admissions – while others said the University will remain unaffected. 

Budget deficits occur when state expenditures exceed revenue. However, because the California constitution requires the state to run a balanced budget, California lawmakers and the governor must address these deficits either by reducing spending or increasing revenue. A revised budget is introduced every fiscal year to ensure that the state’s expenditures align with its revenue, but experts said the sizable deficit California currently faces makes the next revision – which is in May – a particularly key one, said Lee Ohanian, a distinguished professor of economics and the director of the Ettinger Family Program in Macroeconomic Research at UCLA.

California has increased spending rapidly over the past five years in response to homelessness, economic emergencies and natural disasters, Ohanian said.

“I don’t think there’s another state that has increased spending so much as California, and California revenues are simply not keeping up,” Ohanian said.

Since 2014, the state has turned to extracting from reserves set aside by former Gov. Jerry Brown, said Daniel Mitchell, a professor emeritus of management and public policy. However, this is a temporary fix, Mitchell added, as the reserves will eventually be depleted, further complicating the status of current and future state deficits.

The UC system’s funding may be reduced as part of this updated budget, Ohanian said, adding that reducing the state budget could affect class size and availability as well as faculty recruitment.

“The share of the UC budget that is paid for by the state is becoming increasingly small,” Ohanian said. “That’s a source of concern for the quality of education and the amount of education we can deliver.”

An agreement between Newsom and the UCs, which states that UCs will receive a 5% base funding increase per year over a sequence of years, is at risk because of the deficit, Mitchell said. Given that there isn’t a formal contract between the legislature and the UC system – it’s only an assurance from Newsom of a 5% increase – the new budget may declare this agreement void, Mitchell added.

“Right now, the University of California isn’t going to get the increase that it was promised on July 1 and what it’s been promised … a year after that,” Mitchell said. “Somehow, the University is going to have to adjust to that because the revenue they were expecting isn’t going to be there.”

Without the 5% increase each year, UC schools would have to explore alternate routes to account for the loss of income, including raising tuition or admitting more out-of-state students, he said. Ohanian added that the UCs previously experienced furloughs and faculty pay cuts from a similar budget emergency in 2010.

Jim Newton, a lecturer of public policy, said he does not believe the absolute dollar amount allocated to the UCs would change but added that the UCs are still likely to receive less than needed to break even. In the event that happens, unfilled positions will stay empty, new initiatives will not launch and tuition will rise, Newton added.

Despite the size of the deficit, Newton said he does not believe this can be considered a fiscal crisis.

“This is something to be mindful of and to pay attention to,” he said. “But I don’t think it’s a crisis, and I don’t think that is something we should pay extra care about.”

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Gabriella Sonnhalter
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